UK taxpayer will be liable for Hinkley C billions

The EPR nuclear reactor is a busted flush. The two examples under construction in France and Finland are way over time, and budget. If the UK goes ahead with an EPR at Hinkley Point in Somerset, writes David Toke, the taxpayer will pay a huge price ...

The simple mathematics of government incentives for nuclear and other renewables demonstrates that Caroline Flint's logic flies in the face of reality.

As construction delays for the French and Finnish EPR nuclear power schemes lengthen, the odds that the British taxpayer will end up bailing out the EPR planned for Hinkley C in Somerset are rising higher and higher.

Put simply, if the British scheme experiences similar delays, then the British taxpayer is bound to pick up the tab, over and above the already high price that we will be paying for the plant's construction.

Reports from Reuters indicate that the EPR being built in Finland will now take at least 13 years to build, and also the reactor being built in France is becoming more and more behind schedule.

A raft of flawed assumptions

The Hinkley C project is scheduled to be built in eight years, starting in 2015 - assuming an early positive go-ahead from the European Commission.

The UK Government's deal for Hinkley C involves not just paying them £92.50 for 35 years in 2013 prices (increasing in line with CPI - so much higher by 2023), but also that the Government will provide £10 billion of loan guarantees.

The Government insists that there will be no taxpayer subsidies, and that the loan guarantees will allow the project to access much lower interest charges - unlike renewable energy of course which does not get loan guarantees.

However, that depends on the plant generating electricity, and income, before the loan repayments are due. If the constructors take out loans with an eight-year maturity, it follows, that if the plant is not complete then the constructors will call in the loan from the Treasury.

Let us not stand for any nonsense from the Government that the constructors will have to foot the bill. The Government will be under great pressure to allow a partly build nuclear power station to be completed.

If it's not the taxpayer, it will be the consumer that pays

Perhaps the Government will cover its embarrassment by making the electricity consumer reimburse the Treasury, but that will simply increase the price of the project for the electricity consumer even further.

Indeed, this is precisely what happened with the last nuclear power station that was built in the UK, Sizewell B. This was still being built when the electricity industry was privatised in 1990, and the new private electricity companies would not fund its completion.

So the Government stepped in and it was completed with support from the 'fossil fuel levy' on consumer electricity bills.

Meanwhile the Daily Telegraph is busy crowing about reduced incentives being made available for wind power. They are perhaps (from their point of view) being over-hopeful about the proportion of projects likely to be abandoned under the Government's 'competitive' scheme for awarding contracts to onshore windfarms.

However the Telegraph completely misses the irony that windfarms are going to be built at much lower prices than Hinkley C, with much shorter 15 year contracts and without the benefit of any loan guarantees.

Labour's Caroline Flint - clueless

Meanwhile Caroline Flint MP, Labour's energy suprema, is providing no opposition to the Coalition's Hinkley C madness. On the contrary, she is playing cheerleader - and demonstrating to the world that she needs to go back to primary school for some lessons in basic arithmetic.

In a remarkable piece of double-think Flint has declared that nuclear power in the shape of Hinkley C is "cheaper than other forms of renewable energy". This assertion flies in the face of the numbers. She rules out the possibility of a Labour Government renegotiating the Hinkley C contract.

For the moment, let us leave a critique of the extremely tendentious re-designation of nuclear power as a 'renewable' source of energy for another time. Let us look at the numbers. The simple mathematics of government incentives for nuclear and other renewables demonstrates that Caroline Flint's logic flies in the face of reality.

As previously noted Hinkley C has a contract for 35 years, with loan guarantees for the bulk of the investment, at a strike price of £92.50. This price will be increased in line with the the CPI measure of inflation so that by the time Hinkley C starts generating (they say in 2023) the strike price will be well over £100 per MWh.

The plain fact - solar and onshore wind cost much less

Meanwhile onshore wind is actually being given a lower strike price than this from 2016 (£90 per MWh) with only a 15 year year contract and no loan guarantees.

If Hinkley C didn't receive the loan guarantees, the required strike price for nuclear would be guargantuan, and if wind power got the loan guarantees and a longer contract during which the strike price is payable for units of electricity generated then the amount of money required for the wind power would be a lot less than £90 per MWh.

And in reality the cost of offshore wind would be competitive with nuclear as well if these other support measures are taken into account.

Solar power will receive £100 per MWh from 2018 - and this will be less than Hinkley C, especially when the longer contract and loan guarantee support for Hinkley C (which solar doesn't get) are taken into account.

Indeed the Solar Trade Association asked for £91 per MWh from 2018 for large solar arrays on account of continued falling prices. Continued falling prices, note, not continued upward prices as in the case of nuclear power!

The UK's democratic deficit

So we are in the extraordinary position that all three political parties are backing to the hilt a busted flush technology, that will cost UK taxpayers and energy consumers untold billions, and which will not generate a single kilowatt-hour until well into the next decade.

And all at a time when renewable technologies are available that are cheaper than nuclear, that investors are ready and waiting to pile their money into if only the Government will end its policy dither, and that can be built and plugged into the grid within months.

Meanwhile the only hope for UK taxpayers and consumers to be saved from the Hinkley C fiasco comes, not through our own democratic structures and processes, but from the unelected European Commission.

Dr David Toke is Reader in Energy Politics in the Department of Politics and International Relations in the University of Aberdeen.

This article is an amalgamation of two articles both originally published on David Toke's blog: